Massachusetts Set To End Vertical Integration

Massachusetts Set To End Vertical Integration

Posted by Nancy Moraa on 08/08/2020 in News

Medical content reviewed by Dr. Joseph Rosado, MD, M.B.A, Chief Medical Officer

Massachusetts Gets Ready To End Vertical Integration

Massachusetts is yet again making strides in the cannabis industry. The Massachusetts regulators have plans to remove vertical integration for medical cannabis businesses. This crucial change could make a huge difference for medical cannabis operators. 

Vertical integration requires that dispensaries manage every step of the production process. From cultivation to extraction, processing to manufacturing, and then dispensary retail.  Vertical integrated licensing makes entry into any medical cannabis market more expensive, and time-intensive for corporations. 

Why Do States Like Massachusetts Legislate Vertical Integration Cannabis Licenses?

If a state is going to legalize medical and/or recreational cannabis, it has a legal obligation to make it safe for consumers. States that have opted for vertical integration licensing hold the business owner(s) responsible for quality control. They do this by making sure each step of the process is controlled by the dispensary.  It is an accountability measure; and it works. 

If legalized states did not mandate vertical integration licensing, it would allow dispensary owners to source their products from any producer in the state.  Regulators have concerns about criminal organizations becoming involved in that consumer supply chain.  And the potential for harmful products to make it through third-party distributors into retail stores. 

Dispensaries in the state have to cultivate and process their medical marijuana. The vertical integration of the marijuana business rule has existed since the initial 2012 legalization in Massachusetts.  

However, many states are discussing the cost of vertical integrated licensing.  Issuing medical marijuana cards to patients, to find that cultivation and retail dispensary infrastructure is slow to establish.  That leaves registered patients waiting for medical cannabis products, and not enough supply or retail accessibility to meet demand. 

Ultimately, no matter where the raw cannabis materials come from for manufacturing, the licensed business owner is accountable for quality and safety.  And that liability is something marijuana business owners take very seriously.  Understanding that fact, are vertical licenses really necessary?

According to the Boston Business Journal report, there were 60 total vertical MMJ licenses issued in 2020 by the second quarter. The Massachusetts Cannabis Control Commission (CCC) expressed interest in lifting the rule. The commission will seek public opinion before deciding. 

Amending the Vertical Licensing Requirement for Cannabis Businesses In MA

It is still unclear if the commission will take action or if the lawmakers will need to intervene. “Right now, the law says there has to be vertical integration,” CCC Chair Steven Hoffman Says.

“There’s a question about whether we can allow people to only do one or two, rather than all three operations. The answer to that is unclear, and we’re going to request public comment. We are going to have a debate,” Hoffman further stated. The commissioners also want to maintain the per-company cap at three licenses. That is each for cultivation, processing, and retail. 

The public comment on MA medical marijuana regulations will continue until Aug 14. In September, the commission will vote on the final regulations. 

The commission further considers opting for stricter regulations on businesses. This is mainly those that fail the testing for pesticide and heavy metals. Marijuana Business Factbook states that Massachusetts MMJ sales could reach $265million this year. This will be up from $165million-$205million in 2019.

To Renew Or Transition To Recreational Licensure 

According to Michael Latulippe, development director of the Massachusetts patient Advocacy Alliance, businesses in Massachusetts have provisional medical marijuana licenses but are yet to open. Businesses need to either renew their licenses or shift to the recreational market. In the recreational market, these businesses will not be vertically integrated. 

“Growing a facility can cost between $5million to $10million. There is a huge barrier in place,” Said Latulippe. 

“Dropping the vertical integration rule could expand the medical marijuana industry. It would expand it to craft and boutique businesses,” He further adds. 

Latulippe also expressed his interest in bringing more marijuana businesses to minority communities. Those affected by drug law enforcement will not get forgotten.  Massachusetts may be amending social equity legislation to govern the issuance of cannabis business licenses.

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